In May 2008, Alaska enacted legislation authorizing the creation of the Alaska Renewable Energy Fund, a grant fund administered by the Alaska Energy Authority (AEA). The grant program is intended to provide assistance to utilities, independent power producers, local governments, and tribal governments for feasibility studies, reconnaissance studies, energy resource monitoring, and work related to the design and construction of eligible facilities. In order to be eligible for a grant, a project must be located within Alaska and be a new project not in operation on August 20, 2008, or an addition to an existing project made after the same date. Projects should be constructed and operated for the public benefit. The list of eligible technologies includes solar, wind, geothermal, hydrothermal, certain types of biomass, biogas, wave, tidal, waste heat utilization, river in-stream power, and hydropower. Also eligible are: fuel cells that use hydrogen generated from an eligible renewable resource or natural gas; certain natural gas projects located in small communities; and, electricity or natural gas transmission and distribution infrastructure projects that link an eligible project to related infrastructure.

The AEA will not actually approve projects; it will issue recommendations to the state legislature, which will make funding decisions. The AEA evaluates projects on the public benefit of the project using an economic model for consistent parameters and assumptions between projects. There is usually one round of funding per fiscal year, and the first solicitation took place in September 2008. The current solicitation, Round IX, closed on September 15, 2015. Solicitations accepted during one fiscal year are funded in the following fiscal year.

The original enabling legislation stated an intention to provide $50 million in funding annually to the program for five years. HB 250 (2012) extended that intention to provide $50 million in funding annually for each of the 10 fiscal years until the program expires on June 30, 2023, but this amount is subject to legislative appropriation. Through FY 2015, the legislature has authorized over $260 million in grants. This year's target allocations are 50% for reconnaissance, feasibility and resource studies, and 50% for final design, permitting and construction projects. In 2013, AEA also established a target allocation for heat projects to compose 30 percent of the total funding recommendation. These targets are subject to adjustment based on actual available funding and submissions. In addition to the targets for allocating total funding, AEA has put forth the following funding limits per grant:

Reconnaissance, and Feasibility and Design studies: 20% of anticipated construction costs, not to exceed $2 million

Final Design and Permitting, Construction and Commissioning: $2 million per project in "Low Energy Cost Areas" and $4 million in High Energy Cost Areas

Applications are evaluated and ranked based on the burden of energy costs in the affected project area, the type and amount of matching funds committed, project feasibility, project readiness, public benefits, and the sustainability of maintaining and operating the project.

See the program web site for additional details, including information on funding and eligibility questions.